Monetary Policy and the Volatility of Real Exchange Rates in New Zealand

Kenneth D. West ()

No 10280, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The relationship between interest rates and exchange rates is puzzling and poorly understood. But under some standard assumptions, interest rates can be adjusted to smooth real exchange rate movements at the possible price of increased volatility in other variables. In New Zealand, estimates made under some generous suppositions about what monetary policy is able to accomplish suggest that decreasing real exchange rate volatility by about 25% would require increasing output volatility by about 10-15%, inflation volatility by about 0-15% and interest rate volatility by about 15-40%.

JEL-codes: E52 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-ifn, nep-mac and nep-mon
Date: 2004-02
Note: EFG IFM ME
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w10280.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Monetary policy and the volatility of real exchange rates in New Zealand (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:10280

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10280
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().